Credit delinquency rises 23 percent

Experts cite real estate market, worsening employment


The number of credit delinquents has increased by more than 23 percent over the past year.

A local credit appraiser NICE Information Service said on Sunday that the index showing the increase of credit delinquents every month scaled up from 16.83 in April last year to 20.80 in March this year, which is a jump by 23.6 percent. A higher index, developed by NICE, means more credit delinquents.

The index has been on the increase since the latter half of last year when the economic slowdown began to intensify. Delinquents rose in every category, including borrowers from financial institutions and credit card users.

The percentage of the lowest grade in the scale of one to 10 in credit rating also increased to 1 percent (405,000 persons) in May, which used to be 0.84 percent (333,000 persons) at the end of 2010. The figure is the biggest-ever since late 2009 when it hit 1.21 percent right after the 2008 world financial crisis.

Credit appraisers found the cause for increasing credit delinquents was in snowballing household debt and the worsening employment market situation.

“The aggravating real estate market drove the increase of delinquency rates in banks and multiple loan defaulters led that of the non-banks,” said Kim Hyung-chan, the head of NICE’s CB research center.

Household debts here marked 922 trillion won, the biggest-ever according to the Bank of Korea last week. Delinquency rates have been growing throughout financial institutions ― by 22 percent in card companies, 22 percent in sales finance companies, 18 percent in savings banks, 12 percent in private lenders, 6 percent in mutual finance firms and 5 percent in banks.

In terms of employment, employment in temporary or self-employed work is expanding faster than full-time employment, meaning those with jobs generally have worse conditions.

The number of temporary or self-employed workers increased in the second quarter this year by 73,000 and 173,000, respectively, but that of full-time workers only increased by 379,000.

In the first quarter of 2010, when the market was more stable, temporary or self-employed workers decreased while full-time workers increased by 651,000.

In the meantime, the nation’s credit card spending growth fell in the first half of this year from a year earlier mainly because of an economic recession and lackluster consumer demand, according to a report from the Bank of Korea.

Purchases made with credit cards totaled 1.51 trillion won on average per day in the first six months, up just 3.3 percent from a year earlier, the report said.

The figure lags behind the 11.2 percent growth tallied for the period last year. It also marks a sharp decrease from the 8.0 percent on-year growth reported for the second half of last year.

The central bank attributed the slow growth to the continued economic slump and a corresponding drop in domestic consumer spending.

The total number of new credit cards issued by companies in the first hlaf of this year shrank 4.8 percent on-year to just under 116.4 million.

By Park Min-young  (claire@heraldcorp.com)